Profits seen off more than 10 percent
NEW YORK (Reuters) - The U.S. corporate profit outlook is deteriorating rapidly, with S&P 500 earnings for the second quarter now seen falling at a double-digit pace from a year earlier, according to Thomson Reuters Proprietary Research released on Tuesday.
Second quarter profits are expected to fall at a rate of 10.2 percent, compared with the Monday estimate for a drop of 9.6 percent. At the end of May, analysts expected a 7.3 percent drop.
A worsening outlook for consumer discretionary and financials was behind the bleaker earnings view.
Soaring gasoline prices and a limping economy have hampered the outlook for consumer discretionary companies such as General Motors GM.N and electronics retailer Circuit City an Stores CC.N. Among the most recent of major victims reporting impact from soaring crude oil, United Parcel Service Inc(UPS.N), the world's largest package-delivery company cut its second-quarter profit outlook citing high fuel costs and a slack U.S. economy.
At the same time, the credit crisis brought on by subprime mortgage failures has left the banking sector searching for new ways to create revenues now that several of their most profitable businesses have been all but shutdown.
The financial sector was hit by heavy selling most recently as Goldman Sachs & Co strategists told investors it had changed its previously positive view to "underweight" for U.S. financial, while also giving a negative outlook for consumer shares, saying weakening consumer demand and deterioration in the credit markets will weigh on profitability.
UPS's announcement came just a week after main rival Memphis-based FedEx Corp (FDX.N) posted a quarterly loss and gave a weak profit outlook for its fiscal 2009. The two companies are seen as bellwethers of the U.S. economy due to the large volume of commercial and consumer goods they transport.
